The monetary policy you describe is correct however the chinese people would not be alot wealthier but be poorer.....

So rapidly debasing the currency is making the average Chinese person richer? Seriously? It's because of this debasement that they are forced to sell everything abroad instead of actually consuming it themselves. The chinese only export to 1st world countries, but never use the dollars (or euros) they receive to buy anything from abroad. Sounds like a bad deal to me. Most of the wealth the Chinese produce ends up as products in the homes of western nations and as huge wealth reserves that the Chinese government uses as political power tools.

Originally Posted by Felya420

If their employers paid them more, they would be a lot wealthier. The government does not control how much they get paid. What's the minimum wage in China? What's the maximum allowed?

The government controls their purchasing power by debasing the currency their paid in.

So rapidly debasing the currency is making the average Chinese person richer? Seriously? It's because of this debasement that they are forced to sell everything abroad instead of actually consuming it themselves. The chinese only export to 1st world countries, but never use the dollars (or euros) they receive to buy anything from abroad. Sounds like a bad deal to me. Most of the wealth the Chinese produce ends up as products in the homes of western nations and as huge wealth reserves that the Chinese government uses as political power tools.

The government controls their purchasing power by debasing the currency their paid in.

Yes...rapidly devaluing their currency is making the average chinese person at this point in time richer. Im not going to explain why because i dont feel like it. You are correct that it is creating an inflation spiral. But that is another story and will be a massive shitstorm once it hits....just expect another huge recession in the near future.

Isn't China becoming the most powerful nation in the world? Aren't they communist? Doesn't that mean it's already working? It's not China that owes trillions of dollars to the capitalist world, but the capitalist world that is in debt to a single communist nation.

Don't get me wrong, they couldn't have gotten there without capitalist corporations reaching out for the cheapest production they could. But, if the free market dictates cheapest labor is in a communist nation, than what happens to capitalism and the free market?

China isn't communistic. No so called communist country has ever been true to the original idea of communism. Communism as most people understand it today is a perversion of the original form of communism (which has never been implemented in any country and propably never will). Now don't take this as if I'm longing for that day to come, I'm not a communist, not a modern one or one that believes in the original form of it. I just pointed out how it is.

In conclusion: communism doesn't work because it doesn't exist anywhere else than in writing.

Yes...rapidly devaluing their currency is making the average chinese person at this point in time richer. Im not going to explain why because i dont feel like it.

That's just insane. The Chinese people are sending out massess of products to foreigners, while they cannot in return important almost anything because their bank keeps devaluing their currency.

So in effect, the Chinese people are giving away goods, only to be left to circle jerk eachother with an ever devaluing currency and the rest of domestic production, while most of the profits of the Chinese are pocketed by their central bank?

That's just insane. The Chinese people are sending out massess of products to foreigners, while they cannot in return important almost anything because their bank keeps devaluing their currency.

So in effect, the Chinese people are giving away goods, only to be left to circle jerk eachother with an ever devaluing currency and the rest of domestic production, while most of the profits of the Chinese are pocketed by their central bank?

Your incorrect.....i could point you in the right direction i suppose.

This is the simpler form of the model.....http://en.wikipedia.org/wiki/Comparative_advantage China is a labor abundant country....devaluing currency allows the process of trade to occur for china and in effect enables china to reap the benefits of trade.

Your incorrect.....i could point you in the right direction i suppose.

This is the simpler form of the model.....http://en.wikipedia.org/wiki/Comparative_advantage China is a labor abundant country....devaluing currency allows the process of trade to occur for china and in effect enables china to reap the benefits of trade.

So by artificially making the Chinese labour cheap, you're helping the chinese labourers? I think you're relying on some theories a bit too much now without looking at all the factors. You're also forgetting that while the Chinese Central Bank may be better off, the Chinese people aren't.

As the PBoC takes foreign currencies from its exporting citizens, it only floods the domestic chinese market with freshly printed Yuan. These new Yuan does not increase the wealth of the population there. It simply dillutes the existing Yuan. The actual wealth is the dollars or Euroes which could've been used to purchase goods from western nations. But this wealth is kept by their Central Bank.

To summarize: The wealth that the Chinese export ends up in their central bank, while the only wealth the Chinese get to have is the production that is sold domestically or whatever their government decides to spend on them.

So by artificially making the Chinese labour cheap, you're helping the chinese labourers? I think you're relying on some theories a bit too much now without looking at all the factors. You're also forgetting that while the Chinese Central Bank may be better off, the Chinese people aren't.

As the PBoC takes foreign currencies from its exporting citizens, it only floods the domestic chinese market with freshly printed Yuan. These new Yuan does not increase the wealth of the population there. It simply dillutes the existing Yuan. The actual wealth is the dollars or Euroes which could've been used to purchase goods from western nations. But this wealth is kept by their Central Bank.

To summarize: The wealth that the Chinese export ends up in their central bank, while the only wealth the Chinese get to have is the production that is sold domestically or whatever their government decides to spend on them.

Incorrect.

The value of currency only affects the individual if they participate in international transactions. In the domestic economy inflation is created.....but comparatively the individual has more cash. Does it hurt chinese that participate in or rely heavily on imports...you betcha...but overall china is a net exporter by a massive massive margin. Devalued currency allows china to reap the benefits of comparative advantage.

The value of currency only affects the individual if they participate in international transactions. In the domestic economy inflation is created.....but comparatively the individual has more cash. Does it hurt chinese that participate in or rely heavily on imports...you betcha...but overall china is a net exporter by a massive massive margin. Devalued currency allows china to reap the benefits of comparative advantage.

Im not debating this any further...its pointless waste of time.

So China is only sending out goods but getting none themselves? How exactly are they getting richer? Oh but they have alot of foreign currency! Yes, but it's taken by their central bank.

And what you don't seem to realize, is that printing money doesn't make the whole economy more prosperous. Certainly the one's who get the Yuans will be more wealthy in comparison with the rest. But in this case they're essentially just diving the pie into ever small pieces by printing more currency. The amount of products that this currency goes after does not change. And you can't eat Yuans.

So China is only sending out goods but getting none themselves? How exactly are they getting richer? Oh but they have alot of foreign currency! Yes, but it's taken by their central bank.

And what you don't seem to realize, is that printing money doesn't make the whole economy more prosperous. Certainly the one's who get the Yuans will be more wealthy in comparison with the rest. But in this case they're essentially just diving the pie into ever small pieces by printing more currency. The amount of products that this currency goes after does not change. And you can't eat Yuans.

You're just totally off base here.

The chinese dont export literally 100% of everything they produce....thats where they get their goods from... domestic production. Obviously wealth isnt going to be shared equally ( irony being that its a communist nation).

"Printing money does not make the whole economy prosperous" Yes this is true but...this is why i didnt even want to discuss economic issues in this thread. The fact that you even felt the need to clarify this point to me shows me that my understanding of economics is far far far beyond yours.

The chinese dont export literally 100% of everything they produce....thats where they get their goods from... domestic production. Obviously wealth isnt going to be shared equally ( irony being that its a communist nation).

Well obviously they don't export 100% of their production, otherwise they would all die of starvation.

But they export much, much more than import. That means that the Chinese are sending out goods but only receiving currency. Now that's not so bad, as you can use this currency to import later. But their Central Bank takes all this currency and instead gives them more printed money that just dillutes the Yuans already in the economy. Thus, the Chinese people do not benefit from this at all.

Communism can work, the whole world just has to get on board. Make it happen.

someone needs to stop slacking in history class in school and pay attention. currency has existed almost since the creation of the world and has had many forms, the most satisfactory of which is the one atm - money.

Well obviously they don't export 100% of their production, otherwise they would all die of starvation.

But they export much, much more than import. That means that the Chinese are sending out goods but only receiving currency. Now that's not so bad, as you can use this currency to import later. But their Central Bank takes all this currency and instead gives them more printed money that just dillutes the Yuans already in the economy. Thus, the Chinese people do not benefit from this at all.

This is painstakingly irritating.....i discuss economic theory with Phd's on a regular basis and to really try to flesh this out on mmo-c forum is just /sadface...

Put it this way....if china were to not purposefully devalue their currency, how would they be better off? Just really think it through.....THERE IS A REASON that the government is so very much intent on keeping it that way or do you think they are just doing it for fun?

Put it this way....if china were to not purposefully devalue their currency, how would they be better off? Just really think it through.....THERE IS A REASON that the government is so very much intent on keeping it that way or do you think they are just doing it for fun?

Thanks for reading anything I've said. Yes - the government is better off, but the people aren't.

The government is buying dollars and euros from their citizens with paper currency they just printed out of nowhere. Good deal right?

Originally Posted by Aurust

This is painstakingly irritating.....i discuss economic theory with Phd's on a regular basis and to really try to flesh this out on mmo-c forum is just /sadface...

I discuss it too. It's called Business School or University. But I don't tell people that "I don't need to argue it with you, look at my degree/credentials bitchez!"

I haven't read the entire thread yet, but I have an idea to where this notion is going. And with that I will say this; life isn't fair. It never has been, and it never will be. It doesn't matter if its "digits", gold coins, or shiny rocks. There will always be a victor and loser in life.